Sen. Joe Manchin said he is “deeply concerned” about proposed SEC rules that would require publicly listed companies to disclose risks to their bottom lines from climate change.
The news: In a letter Monday to SEC Chair Gary Gensler, Manchin questioned the need for the measures released for public comment last month. The West Virginia Democrat suggested that making firms measure and track greenhouse gas emissions could chill investment in fossil fuel businesses while imposing costs on all affected companies.
“[T]he proposed rule has the potential to run counter to the SEC’s long-standing commitment to its mission by adding undue burdens on companies, while simultaneously sending a signal of opposition to the all-of-the-above energy policy that is critical to our country right now,” wrote Manchin, who leads the Senate’s Energy and Natural Resources Committee.
Context: The SEC is an independent agency — lawmakers like Manchin are using their platform to weigh in on one of the financial regulator’s more polarizing rulemakings.
Manchin’s criticism comes on the heels of his opposition to Sarah Bloom Raskin, President Joe Biden’s one-time pick to lead the Federal Reserve’s Wall Street oversight. Manchin effectively killed Raskin’s nomination over concerns about her calls for the financial system to insulate itself against climate change-driven shocks. He raised similar concerns in his critique of the SEC’s proposal.
“The most concerning piece of the proposed rule is what appears to be the targeting of our nation’s fossil fuel companies,” Manchin wrote. “Not only will these companies face heightened reporting requirements on account of their operations, but they will also be subjected to additional scrutiny for the Scope 3 emission disclosures of other companies that utilize their services and products.”
Background: Gensler has framed the SEC’s proposal as a way to provide transparency for investors seeking to reduce exposure to assets vulnerable to natural disasters or policies that would devalue high-carbon assets. And he has taken steps that aim to ensure the proposal can survive political and legal scrutiny.
Much of the political debate centers on how companies report “Scope 3” emissions — meaning accounting for the emissions from sold products — and how they determine whether those emissions are material.
Manchin claimed the rule would “seemingly politicize a process aimed at assessing the financial health and compliance of a public company.”
Republicans and industry groups that have criticized the proposal would prefer a voluntary approach, which Manchin also advocated, though advocates of tougher rules said those data are often incomparable and confusing to investors.
At the same time, progressives including Sen. Elizabeth Warren (D-Mass.) have faulted Gensler for what they perceive as a light touch.
Proponents of a more stringent rule claim the SEC proposal lets companies with large Scope 3 emissions off the hook. The proposal only requires such reporting if companies have set a Scope 3 target — which few have — or if a company itself determines those emissions are material, meaning it’s information an investor would be reasonably expected to want to know.